Clearing Terms SIX x-clear Ltd for SIX Swiss Exchange Ltd

Transcription

1 Clearing Terms SIX x-clear Ltd for SIX Swiss Exchange Ltd December 2008

2 Table of contents 1 Purpose of the Clearing Terms 3 2 List of Securities eligible for Clearing 3 3 Technical and operational specifications 3 4 Off Order Book Trades 3 5 Margins 4 6 x-clear Default Fund for SWX Europe and SIX Swiss Exchange 9 7 Order of realisation of collateral (defence lines) 12 8 Account structure 13 9 Settlement Late Settlement Corporate actions Agent trades Amendments to the Clearing Terms Address for x-clear Members to contact in accordance with the GTCB Validity 21 Page 2

3 1 Purpose of the Clearing Terms In accordance with the Contract for Clearing Services between SIX x-clear Ltd (x-clear) and the x-clear Member the Contractual Relationship between x-clear and the x-clear Member is governed, besides the Contract for Clearing Services, the Pledge Agreements for Margins and for the Default Funds, the Pledgeholder Agreement, the GTCB (Swiss Law) and the Exchange Specific GTCB SIX Swiss Exchange, by the following Clearing Terms. Certain requirements in respect of the GTCB (Swiss Law) and the Exchange Specific GTCB SIX Swiss Exchange will be defined in more detail in these Clearing Terms. The Clearing Terms are an integral part of the Rules & Regulations and constitute, together with the x-clear Contract for Clearing Services, the Pledge Agreements for Margins and for the Default Funds, the Pledgeholder Agreement, the GTCB (Swiss Law) and the Exchange Specific GTCB SIX Swiss Exchange, one contract which governs the legal relationship between x-clear and the x-clear Member. The specifications of the technical infrastructure (IT, communication, etc.) are described separately in the Business Partner Specifications and are published on the x-clear website. 2 List of Securities eligible for Clearing A list of the Securities eligible for Clearing is published on the x-clear website. 3 Technical and operational specifications The x-clear Member may not commence operations until it has confirmed in writing to x-clear that it is has conducted tests showing it is technically and operationally ready to go productive. The relevant confirmation form will be provided to the x-clear Member by x-clear in connection with application for membership. 4 Off Order Book Trades x-clear will also act as the Central Counterparty in SIX Swiss Exchange Off Order Book Trades. Where both parties to an Off Order Book Trade are either x-clear Members or x-clear NCMs, x-clear will enter into the Off Order Book Trade as the Central Counterparty if the Off Order Book Trade can be accepted into Clearing under the present Clearing Terms, this not being the case during the time from 7.00 p.m. to 8.00 a.m. CET. Page 3

4 x-clear can reject and cancel an Off Order Book Trade until the end of the first trading day after Matching (T + 1). Where an Off Order Book Trade is rejected by x-clear, notice of rejection will be sent manually (by fax, , etc.) to SIX Swiss Exchange. The x-clear Members concerned will be notified by SIX Swiss Exchange of the rejection. The bilateral agreement between the two x-clear Members will remain in force. This notwithstanding, the x-clear Members must re-enter the Off Order Book Trade, but do not need to issue a Clearing order. SIX Swiss Exchange will subsequently send notice of cancellation to x-clear. 5 Margins 5.1 Total Margin The total of all margin requirements for all x-clear Exchanges corresponds to the initial margin, multiplied by the risk rating coefficient, taking into account the variation margin. The amount of collateral necessary is reviewed on a regular basis, which allows for a very fast response to market developments and to any changes in an individual x-clear Member s situation. If an x-clear Member is a participant of SIX Swiss Exchange and/or SWX Europe as well as a participant of further exchanges for which x-clear acts as Central Counterparty, the margin requirement for all these x-clear Exchanges, of which the x-clear Member is a participant, will be consolidated on the basis of all Outstanding Contracts as a net position of the gross margins of the individual x-clear Exchanges. All margins are calculated in Swiss francs. 5.2 Initial Margin and risk rating coefficient Initial Margin Principle The initial margin is continuously calculated on the basis of the net positions of all Outstanding Contracts per Security held by the Member, whereby in each case the maximum value resulting from the calculation of the short-term and the long-term Value at Risk (VaR) is decisive. For the calculation of the initial margin, Securities are allocated to different risk buckets. Using the historic Value at Risk model, the current VaR is calculated per Security. For this purpose, historic data of the past 2 years (approx. 500 days) are used for the long-term VaR, Page 4

5 respectively of the last 3 months (approx. 90 days) for the shortterm VaR (with calculation of the 2-day VaR on the basis of a confidence interval of 99%). The VaR is generally calculated on a weekly basis; in case of difficult market conditions, it may also be calculated daily. Securities traded on different exchanges are subject to the same risk bucket structure. Risk buckets are formed at intervals of 5% and the respective mean value is defined as the initial margin. Clearing-eligible securities with similar risks (defined by the VaR) are allocated to the same buckets and, for this purpose, the respective differentiated initial margin is calculated on the basis of the positions that have been netted per bucket. Risk bucket VaR range Initial margin in % No. 1 0 to 5 3,5 % No. 2 5 to 10 7,5 % No to 15 12,5 % No to 20 17,5 % No to 25 22,5 % No to 30 27,5 % For Securities with trade prices available for less than 250 stock exchange days during the past 2 years, the presumed VaR lies between 10% and 15%. The respective initial margin is applied to the net position of such Securities Risk netting coefficient I (intra bucket) Due to the fact that the equities contained in a bucket do not correlate perfectly, a risk netting coefficient (based on the average correlation) is used for netting the respective Securities positions within the same bucket (risk netting coefficient I). The initial margin is therefore calculated first per ISIN on the respective net position (long or short). Subsequently, the total of all net long positions and the total of all net short positions of the same bucket are netted using the risk netting coefficient I on the smaller of both values Risk netting coefficient II (inter bucket) Additionally, a further risk netting coefficient is calculated between the risk buckets. The net margins per risk bucket (positive/negative values) are summed up across all buckets, taking into account the algebraic sign (plus/minus). This results Page 5

6 in the total of the initial margins net long and the total of the initial margins net short. The smaller of these two figures is multiplied by the inter-bucket coefficient and the margin is reduced by that amount Initial margin Upon each purchase or sale respectively, the initial margin is changed in real time. The total amount of the initial margin is derived from the net position of all Outstanding Contracts of the Securities from all x-clear Exchanges contained in a risk bucket adding up all buckets and taking into account the variation margin Extreme net open risk position In the event of an extreme net open market position (i.e. the absolute amounts of a net long minus a net short position) of CHF 750 million of a participant (consolidated position across all x- clear Exchanges), the participant's existing risk rating coefficient is doubled for the period in which this condition persists, i.e. the margin requirements are accordingly higher. In such a case, the x-clear Member is informed by phone Risk rating coefficient The risk rating coefficient is dependent on the x-clear Member's rating and has a direct influence on the initial margin. The risk rating coefficient is the factor by which the initial margin is multiplied. x-clear accepts the following as external rating agencies - Standard & Poor s - Moody s - FITCH/IBCA The risk rating coefficient takes into account the probability of non-performance on the part of an x-clear Member. The risk rating coefficient is determined on the basis of the rating and is used to weight the initial margin, i.e. margin requirements increase or decrease depending on the x-clear Member's credit rating. The level of the risk rating coefficient is reviewed at least once a year and is determined as follows: Page 6

7 Rating Moody s Risk coefficient Standard FITCH & Poor s AAA to A- Aaa to A3 AAA to A- 1 BBB+ to BBB- Baa1 to Baa3 BBB+ to BBB- 1.5 BB+ to BB- Ba1 to Ba3 BB+ to BB- 2 B+ or lower B1 or lower B+ or lower determined case by case If several ratings are available, the second best rating is taken. x-clear uses the long-term counterparty rating. If an institution does not have an external rating, x-clear will determine an internal rating by means of a benchmarking process. Major benchmarking criteria include: - Capital resources - Degree of self-financing - Profitability - Background (company history/ownership structure, etc.) - Domicile - Reputation 5.3 Variation Margin The variation margin covers fluctuations that have already impacted on outstanding positions per security. The variation margin is marked to market several times daily, normally every hour, on the basis of the net position of all Outstanding Contracts per Security. The level of the variation margin is dependent solely on the market valuation. Positive and negative values (price gains/losses) are netted out across all Securities. Based on these values, negative values are charged additionally while positive values are credited to the initial margin. 5.4 Margin calls If the margin cover is found to be insufficient, x-clear will automatically issue a margin call in real time. The following rules apply: 1. The margin call is in principle to be met in the form of money. Page 7

8 2. Every Member is required to designate an account which x-clear is entitled to debit with the amount of the margin call in accordance with the GTCB (Swiss Law). The following types of account may be used: a) SIC account b) Ordinary money account at SIX SIS Ltd (SIX SIS) The x-clear Member may designate a charge account only (SIC or ordinary money account at SIX SIS). Generally, a SIC account is required for margin calls. The usage of an ordinary money account of SIX SIS is only accepted on an exceptional basis and until revocation by x-clear. For the purpose of transferring margins, x-clear will open an x-clear Money Collateral Account at SIX SIS for each Member in accordance with Art of these Clearing Terms. 3. Each margin call must be met within 60 minutes. 4. If the margin call is not satisfied within the stipulated time and the margin cover is still insufficient, no later than 1 hour before the start of trading on the next trading day the Open Offer will be suspended/x-clear will refuse to act as Central Counterparty in SIX Swiss Exchange Off Order Book Trades, x-clear having an option at the same time to declare the x-clear Member to be in Default. As a consequence, the x-clear Member will be excluded from trading on the respective Relevant Exchange. 5.5 Margin deposits Collateral values The following are generally acceptable as collateral: Collateral type Money (legal tender, freely convertible currencies accepted by x-clear) CH government bonds, confederation and cantons, in CHF Other first-class CHF bonds (minimum rating of A-); including SNB money market book claims First-class foreign currency bonds (minimum rating of A-); including ECB money market book claims Blue chips tradable on SWX Europe (SMI stocks) Page 8

9 The current collateral values are published via Clearing Notice. Bonds must in principle be eligible for repo transactions with the Swiss National Bank (SNB). Due to the IRS regulations, American Securities cannot be accepted as collateral. Collateral must be replaced 15 days prior to maturity (from this day on collateral ceases to be counted as a margin deposit). Upon request, other types of collateral can be examined for eligibility by x-clear on a case-by-case basis Delivery into the x-clear Collateral Account x-clear Members may transfer margin deposits to the x-clear Collateral Account at all times. The transfer is effected via ATF (MT 542 or MT ) Instruction for Securities or MT 202 Instruction for Money Transfer, which is to be issued by the x-clear Member. x-clear accepts as margin deposits only collateral which is defined in Art of these Clearing Terms as suitable Withdrawal from the x-clear Collateral Account The withdrawal of margin deposits may be instructed automatically by each Member (ATF or MT 202/200) or manually by x-clear. The x-clear Member is, in the case of manual processing, required to submit an appropriate request to x-clear. This may be in writing and/or by fax and/or by . Margin deposits may be withdrawn only when no longer needed. Where margin deposits are to be replaced, the new deposits must be delivered prior to withdrawing the old. Margin deposits requested by 5.00 p.m. will be delivered to the x-clear Member on the same day; requests received after 5.00 p.m. will be executed best effort. 6 x-clear Default Fund for SWX Europe and SIX Swiss Exchange The amount of the contribution payable by the x-clear Member into the x-clear Default Fund for SWX Europe and SIX Swiss Exchange is dependent both on the membership category (x-clear ICM/x-clear GCM) and on the average gross open position over the previous three months. The value of the Securities/currencies is calculated on the basis of their current market value and not on the nominal value of the Securities/currencies deposited. Page 9

10 The types of collateral and collateral values specified in Art above also apply to the x-clear Default Fund for SWX Europe and SIX Swiss Exchange, with the exception of stocks that are not acceptable as collateral for the Default Fund. Collateral must be replaced 15 days prior to maturity (from this day on collateral ceases to be counted as a margin deposit). 6.1 Definitions Average gross open position The average gross open position is calculated on the basis of the average gross open position from the Relevant Exchanges existing on the Settlement days of the previous three months. The daily gross open position is defined as the total of all open positions of an x-clear Member at the end of a Settlement day. 6.2 Adjustment duty x-clear Members are obliged to make adjustments to the x-clear Default Fund for SWX Europe and SIX Swiss Exchange if any of the following occur: Change in gross open position over the previous three months The average gross open position over the previous three months is calculated on a monthly basis according to Art A change in the average gross open position (increase/decrease) will necessitate an adjustment to the contribution to be made. The amount of the contribution is adjusted in accordance with Art. 6.4 of these Clearing Terms. If the contribution needs to be adjusted, the respective participant is notified. The adjustment must be made within the notified period. If the increase is not effected within the stipulated period, x-clear will send a margin call and perform a direct debit. The debit is made to the designated account for direct debits of margin requirements in accordance with Art Each margin call must be met within 60 minutes. If the margin call is not satisfied within the stipulated time and the margin cover is still insufficient, no later than 1 hour before the start of trading on the next trading day the Open Offer will be suspended/x-clear will refuse to act as Central Counterparty in Off Order Book Trades, x-clear having an option at the same time Page 10

11 to declare the x-clear Member to be in Default. As a consequence, the x-clear Member will be excluded from trading on the Relevant Exchange Price fluctuations If as a result of negative changes in the value of the pledged collateral the margin deposits no longer cover the Default Fund balance which is calculated as being necessary, the x-clear Member is likewise obliged to provide additional collateral within 60 minutes. 6.3 Use of the x-clear Default Fund for SWX Europe and SIX Swiss Exchange (obligation to provide additional collateral) Each x-clear Member is obliged to provide additional collateral in favour of the x-clear Default Fund for SWX Europe and SIX Swiss Exchange in an amount not exceeding that x-clear Member's current contribution liability toward the Fund. x-clear can demand that additional collateral be provided if the x-clear Default Fund is used on one or more occasions. This obligation to provide additional collateral may have to be met in one single instalment (full drawdown on the entire Default Fund for SWX Europe and SIX Swiss Exchange) or in the event that several drawdowns are made because the first drawdown did not exhaust the entire Default Fund for SWX Europe and SIX Swiss Exchange in several instalments (partial drawdowns). The amount of additional collateral to be provided by each x-clear Member is calculated on a prorated basis, i.e. corresponding to the percentage which each Member's contribution liability represents of the total existing volume of the Default Fund for SWX Europe and SIX Swiss Exchange. Calls to provide additional collateral in favour of the x-clear Default Fund for SWX Europe and SIX Swiss Exchange will be conveyed by x-clear to x-clear Members in writing. The contribution to restore the amount drawn down must be transferred within five trading days. 6.4 Amount of contribution The contribution liability towards the Default Fund for SWX Europe and SIX Swiss Exchange is secured by means of pledged collateral and is determined monthly on the basis of the participant's average gross open position over the previous three months in proportion to the average gross open position of the remaining participants, whereby the entire Default Fund for SWX Europe and SIX Swiss Exchange contains a minimum amount of Page 11

12 CHF 200 m. The following minimum contributions apply (no cap limitation): - ICM CHF 0.5 m - GCM CHF 5.0 m All contributions are rounded up to the next CHF 0.5 m. 6.5 Delivery and withdrawal of pledged collateral into and from the Default Fund The pledged collateral for the Default Fund will remain in the x-clear Member s Default Fund Collateral Account (Custody and/or Money) at SIX SIS. A corresponding pledge entitlement for x-clear will be annotated on the x-clear Member's account. 7 Order of realisation of collateral (defence lines) The initial margin, the variation margin and the Default Fund all belong to a security construct, the individual components of which are realised / sold on the open market in the following order: - Margins or equivalent collateral provided by the defaulting x-clear Member itself for the respective Relevant Exchange. If the Default occurs only on one of the x-clear Exchanges, the available net margin will be split pro-rata to the gross margin of the x-clear Exchanges across the x-clear Exchanges. The part of the x-clear Exchange where the Default occurred will be realised first. x-clear is entitled to distribute any surplus across the other x-clear Exchanges. - Contribution or equivalent collateral provided by the defaulting x-clear Member in favour of the Default Fund for SWX Europe and SIX Swiss Exchange - Per calendar year a maximum of 50% of available provisions set aside by x-clear - Default Fund for SWX Europe and SIX Swiss Exchange - Provision of additional collateral to the Default Fund for SWX Europe and SIX Swiss Exchange - x-clear's provisions (remaining portion), capital and reserves. The aim of the defence lines and the Default Fund is to prevent systemic risks (domino effect) from impacting the entire finance market. Page 12

13 8 Account structure Each x-clear Member requires specific accounts for the purposes of Clearing. It is immaterial whether the x-clear Member is acting as GCM or as ICM. A distinction is made between Clearing, Collateral and Default Fund Accounts. Account query options are defined in the Business Partner Specifications. 8.1 Clearing Accounts The x-clear Member's outstanding positions from trades effected on the Relevant Exchanges are recorded in Clearing Accounts. The Clearing Accounts are maintained at x-clear. As standard, x-clear will open two Clearing Accounts (House and Client) for x-clear Members (GCMs). Trades which the x-clear Member has itself concluded will be allocated to the House Account, those concluded by NCMs will be allocated to the Client Account (in the latter cases the x-clear Member acts as GCM for the NCM). Deviations from the standard have to be defined as trade-specific information on the trading platform. Taking the net positions of all Outstanding Contracts per Security as basis, the necessary margins are calculated via these Clearing Accounts and matched against the collateral. 8.2 Margining x-clear Collateral Accounts for margin deposits For the purpose of transferring the margins, x-clear will open for each x-clear Member Collateral Accounts (Money and Custody) at SIX SIS in the name of x-clear. The collateral will be transferred or assigned to x-clear as an irregular pledge incorporating a claim to restitution, x-clear thereby becoming the owner of said collateral. The extent of usage of the collateral can be called up by the x-clear Member at any time x-clear Custody Collateral Account As collateral x-clear accepts Securities (shares and bonds used in accordance with Art of these Clearing Terms, respecting the relevant collateral values). Page 13

14 x-clear Money Collateral Account In addition to collateral in the form of Securities, x-clear Members may also provide collateral in the form of money. x-clear will open a Money Collateral Account per currency. The Account will not bear interest Dispo Collateral Account x-clear will open the required Dispo Collateral Accounts at SIX SIS for each x-clear Member. The Dispo Collateral Accounts will be in the name of the x-clear Member and are linked to the x-clear Collateral Accounts relating to that x-clear Member. At end of day x-clear will transfer any collateral not required (Custody and/or Money) from the x-clear Collateral Account to the relevant Dispo Collateral Account operated for the x-clear Member. Collateral which is transferred from the Custody or Money Collateral Account to the Dispo Collateral Account is to be rounded down to the next smallest unit (money) or denomination (Securities). At begin of day x-clear will transfer all collateral in the Dispo Collateral Account from the x-clear Member's Dispo Collateral Account to the x-clear Collateral Account. 8.3 Default Fund Collateral Account x-clear will open at SIX SIS for the x-clear Exchanges a Collateral Account per x-clear Member (Custody and/or Money) for the x-clear Default Funds. A separate collateral account is kept per Default Fund. Remittance of the pledged assets is effected only via one of the collateral accounts. Subsequently, x-clear allocates the pledged assets to the respective collateral accounts per Default Fund. The accounts will be in the name of the x-clear Member. SIX SIS is pledgeholder. The contents of this Collateral Account will be pledged to x-clear by means of a regular pledge. 9 Settlement 9.1 General remarks The Settlement of Exchange transactions remains the responsibility of the Approved Settlement Systems. The Approved Settlement System in the case of SIX Swiss Exchange is SIX SIS. Page 14

15 In this section the term "transaction" will be understood as meaning the Settlement of contracts arising from an Open Offer or Off Order Book Trade. In the event of an x-clear Member defaulting, x-clear may block from the Settlement process any contracts arising from an Open Offer or Off Order Book Trade. x-clear will notify the x-clear Member accordingly by fax, followed by formal written confirmation. The Settlement instructions are structured as follows from the perspective of the x-clear Member: Counterparty Instruction type Instruction placement x-clear CH Inhouse Directly from SIX Swiss Exchange The following table shows the service scope of SIX SIS: Settlement netting Yes Shaping of net transactions Yes Splitting transactions Gross No Net Yes* * manual 9.2 Settlement netting Netting will be conducted by SIX SIS and is optional. In principle, all trades effected in the course of one day in the same Clearing Account are netted on a per Security and per currency basis. 9.3 Shaping x-clear will support net Settlements in SIX SIS up to a cap of CHF 100 million per Settlement transaction. If netting of the gross trades produces an amount in excess of this cap, Settlement will be effected in several smaller amounts by applying the shaping process. 9.4 Splitting x-clear will endeavour to forward the Securities received from the seller to the buyer as quickly as possible. For this reason, x-clear avails itself of the splitting functionalities made available by the Approved Settlement Systems. Page 15

16 10 Late Settlement 10.1 Overview Where the selling x-clear Member is late in delivering the Securities, x-clear may make use of a Securities lending and borrowing and buy-in facility, unless x-clear is late in fulfilling its obligation to deliver the same Securities with the same due date. The damage caused by the selling x-clear Member because of its delay has to be compensated with a fee for "delayed/failed settlement" as set out in the Rules & Regulations. x-clear is entitled to additionally charge the selling x-clear Member external costs (expenses, commissions and other charges) where Securities lending and borrowing and buy-ins are used. The payment obligations of the x-clear Member, based on the Securities lending and borrowing or buy-in effected by x-clear, are due, performable and payable with immediate effect. In the event that security lending and borrowing as well as buy in facility are not successful, the transaction which is not performed will be cancelled and replaced by a payment for compensation Securities lending & borrowing Where the contractual delivery of the Securities is not made by p.m. three trading days after the trade (T+3), x-clear will have the right, at the selling x-clear Member's expense, to acquire the Securities that are lacking by means of Securities lending and borrowing in order to guarantee delivery to the buying x-clear Member. As a participant in SIX SIS, x-clear will acquire the required Securities on SIX SIS standard terms for Securities lending and borrowing. The cost of borrowing Securities will be charged to those sellers who failed to deliver their Securities to x-clear on time (i.e. by 5.00 p.m.). If Settlement is not effected by T+3, a late Settlement fee is charged to the defaulting selling x-clear Member. Half of this fee will be passed on to the buying x-clear Member in cases where it was not possible to borrow the relevant Securities. In the event that both x-clear and the x-clear Member are late in delivering the same Securities with the same due date, the x-clear Member will not be liable to pay a late Settlement fee to x-clear. Page 16

17 10.3 Buy-in For the present, the borrowing option is offered by SIX SIS only. In principle, this option may be taken for all Securities insofar as they are available. If a trade on SIX Swiss Exchange is not settled within three days of its conclusion (T+3, p.m.) because the defaulting x-clear Member's Securities positions are not sufficient, x-clear shall give the defaulting x-clear Member a further three days in which to obtain the securities that are lacking (buy-in of the selling x-clear Member). If the selling x-clear Member is not able to obtain the Securities that are lacking by itself by up to noon CET four days after the maturity date at the the latest (S+4) and does not provide the proof via a receive instruction in SECOM that is in status "Matched", x-clear shall be entitled to initiate the buy-in of the Securities that are lacking by itself. x-clear shall in all cases contact the defaulting x-clear Member before initiating a buy-in. If the defaulting x-clear Member continues in its attempts to obtain the Securities, it shall nonetheless bear the costs arising for x-clear due to the buy-in and shall be obliged to pay the late Settlement fee. In the event x-clear is in delay towards the buying x-clear Member because of the delay of the selling x-clear Member, the buying x-clear Member will be informed by x-clear on the initiation of the buy-in by x-clear. If the buy-in cannot be effected by x-clear due to a lack of liquidity of the Security on T+7, x-clear shall be entitled to reattempt the buy-in for a further period of 13 days, i.e. until T+20. On completion of the buy-in x-clear will advise the defaulting x-clear Member accordingly on the same day by fax or electronic means, providing details of the transaction. The fees charged by x-clear respectively SIX SIS for the buy-in are defined in the Schedule of Fees. The late Settlement fee will be debited to the seller between S and the actual Settlement day (i.e. S+17 at the latest) Novation and cash compensation If the buy-in attempts of x-clear are not successful, the two Single Contracts arising from the Match / Off Order Book Trade for which there is a lack of Securities are to be cancelled on T+20, close of trading, i.e. the Single Contracts between the Page 17

18 selling x-clear Member and x-clear and x-clear and the buying x-clear Member with respect to the Securities that are lacking become void and are replaced by cash compensation claims as described in the following. The cash compensation to be paid by the selling x-clear Member to x-clear amounts to 30% of the Settlement Amount (purchase price at the time of Matching, or, in the event the market price has risen, purchase price at T+20, close of trading) and is forwarded in full to the buying x-clear Member. No further claims arise for the buying x-clear Member towards x-clear from the respective Single Contract. 11 Corporate actions The terms used in the present Article are described in detail in the SIX SIS MarketGuide Switzerland. The execution of corporate actions for Securities that are already in the account (existing positions) differs from the execution for Securities that are yet to be delivered. Distributions on existing positions are made in accordance with the market rules of the Settlement system with which the Securities are deposited. Distributions on positions that are deposited with SIX SIS as collateral in favour of x-clear are made directly by the main paying agent to the participant, i.e. not via x-clear. For distributions on Securities whose delivery is yet outstanding, two types of corporate actions exist: - mandatory corporate actions - voluntary corporate actions 11.1 Mandatory corporate actions / Compensations For trades that are traded "cum" and are settled on or after ex date, compensations are made in all Settlement systems. These systems transfer the distribution from the seller to the buyer. The necessary transactions are automatically generated by the Settlement systems. x-clear is the Central Counterparty for compensations as well; compensations are therefore subject to x-clear's risk management until their Settlement. Page 18

19 Timeline for the Settlement of compensations SIX SIS settles on the later date of either the Settlement date of open transactions or the payment date of the corporate action Withholding tax on compensations SIX SIS applies the standard withholding rate for compensations (tax rate without consideration of any double taxation treaty) Rounding down in case of Securities distributions In the case of compensations due to Securities distributions, the distribution is rounded down to the nearest full number of Securities by SIX SIS Voluntary corporate actions Buyer Election on Swiss Securities If in respect of a voluntary corporate action x-clear delivers Securities late to an x-clear Member, and the latter is then unable to forward these Securities on time to the main paying agent, that Member may request x-clear to settle the voluntary corporate action via x-clear. In turn, for the purposes of this Settlement, x-clear will seek out Members responsible for the delay. The following conditions apply: Trades which entitle the buyer to effect a buyer election with x-clear: - Trade date = election deadline 1 or earlier AND - Contractual Settlement date = payment date (delivery date) - 1 or earlier Trades by sellers who can be called upon by x-clear to settle the corporate action: - Trade date = election deadline -1 or earlier - Contractual Settlement date = payment date (delivery date) - 1 or earlier - Actual Settlement date = payment date (delivery date) 12 noon or later Page 19

20 Time frame for buyers to contact x-clear: SIC close (3.00 p.m.) to 4.30 p.m. on payment date (delivery date). The contact address for Settlement and corporate actions is that given in accordance with Art. 14 of these Clearing Terms. Buyers must inform x-clear of which election option they intend to choose in respect of the Securities. Timeframe for x-clear to contact sellers: SIC close (3.00 p.m.) on payment date (delivery date) until 6.00 p.m. on payment date (delivery date) + 1. x-clear will inform sellers of which election option is being chosen. Settlement of the voluntary corporate action: Sellers appointed by x-clear must settle the option chosen by x-clear according to the conditions valid for the voluntary corporate action as of payment date (delivery date) +4. The relevant Settlement instructions will be automatically generated by x-clear. Sellers must ensure that on the Settlement date they have the necessary assets in the system to be able to effect Settlement. Settlement between x-clear and the buyers will also be effected on the payment date (delivery date) + 4 at the conditions valid for the voluntary corporate action. The relevant Settlement instructions will be automatically generated by x-clear. Exchange of messages with respect to elections and allocations In principle, elections and allocations should be reported using standardised electronic messages. In exceptional cases, faxes may be used. The standardised electronic messages can be transmitted to SIX SIS via MT 565. They must contain information on the pending transaction and the chosen corporate action option. The exact specifications are stipulated in SIX SIS' Business Partner Specifications. After receipt of the election, x-clear will perform a corresponding allocation to one or several transactions of sellers. Sellers are informed with MT 565 messages about the allocation. Deadlines The company defines a deadline until which Securities holders can announce their corporate action option. This deadline is referred to as record date (RD). Deadlines for buyer elections must come before record date in order to enable sellers to react to any buyer elections prior to record date. Page 20

21 x-clear has defined the following deadlines (independent of the Settlement system): Elections on gross Settlements Elections on net Settlements Allocations RD-2, 06:00 p.m. (CET) RD-1, 08:00 a.m. (CET) RD-1, 02:00 p.m. (CET) 11.3 Technical interruptions Should technical problems occur in forwarding an election via the Settlement systems on the last day (deadline) of the buyer election, it must be transferred via fax on an exceptional basis. 12 Agent trades An x-clear Member will always act for x-clear solely in the capacity of principal. Agent trades are not possible. 13 Amendments to the Clearing Terms These Clearing Terms may be amended in accordance with the provisions of the Contract for Clearing Services. 14 Address for x-clear Members to contact in accordance with the GTCB SIX x-clear Ltd Brandschenkestrasse Zurich Switzerland Phone: Fax: Validity In cases of dispute the German of the present Contract shall prevail. Page 21